Program Description

Since its inception, the Pooled Inventory Management (PIM) Program has functioned as a collaborative
effort of 23 owners of 59 United States nuclear electricity generating units which
jointly procures and stores long lead time / high cost equipment which has a low
probability of failure. This equipment can be used by a member’s nuclear unit if a failure occurs, as defined
by the PIM contracts, of a similar component. In other words, PIM could be considered a sophisticated insurance
program. But in reality, PIM has evolved into more over its 28 year history.

The PIM Program is organized under the Pooled Equipment Inventory Company (PEICo), a
Delaware membership company. The day-to-day operations of the PIM
Program are conducted through a management contract that is currently held by
Southern Nuclear Services, LLC, an affiliate of the Southern Company.

The PIM concept was developed by General Electric and seven BWR utility members and incorporated in 1980
[1]. In 1984 the utility members expanded the program to include their PWR
units, and Southern Company assumed the role as the Program Manager through an
unregulated affiliate.

A unique characteristic about the PIM Program is that it is the only nuclear utility sponsored and directed
organization utilizing a common storage facility. The PIM Program, through PEICo, holds title to the equipment. It currently has equipment assets of
approximately $50 million dollars.
In today’s market, this same inventory is estimated to exceed a replacement
value of $130 million dollars. This equipment is warehoused in Memphis, TN
where it enjoys the benefits of being at a central transportation hub and a tax free base in which to operate.

Each participant has executed a substantially identical contract with PEICo, referred to as the Participation
Contract, which defines their rights and duties and the obligations of PEICo and the Program Manager. Each program member assigns a representative that sits on
the PIM Management Committee with an equal voice, i.e., synonymous to a senate. They are charged with providing
overall program direction, monitoring the program status and approving
contracts, procedures and budgets.[2]. In the interim, the Program
Manager's Organization (PMO) takes oversight direction from a Steering Committee which consists of the elected officers of the Management Committee.

The plant owners, through their access to this pool of equipment, have been able to reduce their
procurement and maintenance costs (better than five to one annually) without increasing their risk associated with equipment failures and the potential of
generation unavailability costs. Each line item of equipment has been procured through a process established over the years. For an item of equipment to be considered for PIM there must be (1) at
least two members which will share in the cost of the equipment and (2) this equipment is interchangeable in each participant’s plant or it can be engineered
to be interchangeable. Interchangeability studies, specifications, request for quotes, and purchase
orders are all subject to the equipment committee members’ approval. All costs for this effort are
controlled through an authorization and budget process. Once the equipment arrives at
the PIM warehouse facility, it is a maintained under an Appendix B program and
is ready to be withdrawn by an equipment member when they declare a failure of
the compatible plant component. Deliveries to the plant site have been typically 24 hours and no longer than 48
hours.

While the original PIM Program model was established for high cost emergency spares, a change to the
PIM contracts was made in 2002 such that PIM could address the nuclear industry
emerging need to address parts obsolescence, critical spares and the continuing
pressure to reduce inventory and costs on site. While this is an ongoing process, PIM and its members are beginning to
see the benefits of this change. Consequently the existing PIM Program can procure and store virtually any item
used in a nuclear plant that its members feel would provide them economic
benefit.

In 2008 the PIM Program again modified its corporate structure and contracts to allow non-nuclear electrical
utility business units to utilize the PIM model without the encumbrances sometimes associated with the nuclear industry. This change allows PEICo to establish multiple LLC’s to support their
needs, i.e., a Transmission PIM LLC, a Fossil PIM LLC, etc. It is believed these groups with
common needs could use the PIM model, its existing facilities, documentation, business platforms and lessons learned [3].

[1]
Most of this original effort was under the direction of CP&L’s Ken Bromenshenkel, PIM's first Management Committee Chairman.[2] In the
formative years of PIM, 1980 to 1988, the group met two to four times a year.
Now the Management Committee normally meets annually.
[3] This came about as a lesson
learned from PIM’s work with EEI on their “STEP Program”. In response to EEI’ petition, FERC’s
response of 9-22-06 stated: “We applaud the efforts of participating utilities to use the existing PIM Program and
to extend its spare parts programs to include transformers.”